U.S. corporations piled on almost $1 trillion in debt over the first six months of the year (a 10% increase). Corporate debt has now surged to 56% of GDP. We’ve argued that the level of corporate debt isn’t the problem, in and of itself. Rather, it’s what this debt has failed to generate that is the real problem.
How does one value a stock market in which 12-month forward EPS estimates show their widest dispersion in history? A good start might be with methods we use when forward estimates show practically no dispersion (like three months ago). In either case, we place little weight on such estimates; each revision usually has only marginal impact on our 5-Year Normalized EPS.